Okay, so you are probably thinking… yeah right, here’s that degenerate Double Bubbler banging on about that penny stock again. Well take a brief moment and read the following to see why my opinion is not so outlandish. You may one day thank me for it.
EnSilica develops custom semiconductor chips called ASICs. Essentially dedicated silicon expertly designed to a particular task such as providing encryption for Internet of Things devices, or efficiently moving data across satellite networks as will hopefully soon be the case with their custom ASIC for AST Space Mobile.
Recently MDA Space acquired a relatively low profile Israeli firm Satixfy for $280m in an all cash offer. Satixfy being a competitor to EnSilica in the ASIC marketplace and high growth satellite communications industry, with 2024 revenue of $20.6m. So that acquisition price is over 13x last year’s revenue!
Compare that with EnSilica’s forecast FY25 revenue (to be confirmed in results anticipated next month) of approximately $25m to $27m as well as a forecast FY26 revenue of between $44m and $47m with ‘80% of FY 2026 revenue already covered by existing customer contracts’ according to EnSilica’s trading update on the London Stock Exchange in April. Please note I have used the current FX rate to convert figures that were originally quoted by EnSilica in GBP.
Consider also that another competitor of EnSilica’s is Filtronic who have significant contracts with Elon Musk’s SpaceX. Given the importance of Filtronic’s ASICs to SpaceX it has formed a strategic alliance with the firm and acquired 10,949,079 warrants – 5% of the current share capital of Filtronic – which would give SpaceX the opportunity to acquire a notable stake in the firm. Why would it want that? Well in my opinion to ensure they could have a say in the future direction of the firm as well as perhaps giving them the opportunity to create a defensive position to fend off hostile takeovers of Filtronic.
On the subject of Filtronic it is worth considering their forward price-to-sales ratio compared to EnSilica’s. EnSilica trades at a forward PS of just over 1.12 (against the low end of their current FY26 forecast) which compares to Filtronic‘s forward PS of 5.3 according to Simply Wall St data. If EnSilica achieves a similar forward PS as it approaches it’s anticipated medium term sales projection of c.£100 per year (hopefully together with a healthy profit margin) then you could see a market capitalisation of £500m+. That’s 13.44 times the current share price.
Who do I think are likely contenders to acquire EnSilica? Well Qualcomm could be a prime candidate in my opinion. Or another large and diversified semiconductor manufacturer that appreciates and can take advantage of the breadth of EnSilica’s IP, not just the sat comm work but including the post quantum encryption chip, optical networking design IP and automotive radar IP which is being developed in tandem with Radareye following funding from a consortium including Transport for London, IAG and Admiral.
Another possibility is AST Space Mobile, who EnSilica signed a contract with for a high value satellite ASIC in 2021 and which I understand will be a core component within AST’s BlueBird Block 2 satellite constellation scheduled for launch in the coming year or so. I consider AST a possibility as I wouldn’t be surprised that over time they broaden their offering to more fully compete with SpaceX’s Starlink (e.g. higher bandwidth satellite comms with guaranteed quality of service via terminal devices for static and mobile situations). EnSilica has a suite of IP for satellite terminals (a market which is worth billions of dollars) and owning that IP could help AST better compete with Starlink in that scenario.
I can also see U.S. and European companies such as Boeing, Airbus or Thales taking interest, especially given plans for the European Union’s forthcoming IRIS2 constellation. EnSilica’s IP and talent would seemingly be of great benefit to various industry titans in the satellite communications race that is heating up rapidly.
While I would like to see EnSilica grow to become a future British tech champion, I could understand the management accepting an offer of approximately 13x FY26 revenue. With a notable holding myself, I would not complain either.
While EnSilica’s share price fell last week, I still have immense conviction in this promising company and my recent discussion with Chairman Mark Hodgkins has only given me additional confidence in its future long term potential.
Yes, the share price may be turbulent in the times ahead however I may accumulate further should weakness persist (as I did last week) or following what I feel is an unlikely near term event, a rights issue, as is rumoured on ADVFN for example.
EnSilica is a company I intend to hold for the years ahead given their apparent trajectory as well as potential for being acquired at a significant multiple to its current value.
May fortune favour the brave!
DB
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Disclaimer
The user Double_Bubbler has a position in AIM:ENSI. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.